Fixed weight aggregates method - fisher''s ideal method, Financial Management

Fixed Weight Aggregates Method

In fixed weight aggregates method, the weights used are neither from base period nor from current period but from a representative period. These weights are generally referred to as representative weights or as fixed weights. These fixed weights are unaffected by the selection of the base period. This is the advantage under this method. The user of the method will be able to select a base year that is convenient to him enabling him to change the price base yet retaining the fixed weights.

The students may refer to the weights assigned to various industry groups constituting the Index of Industrial Production presented in the annexure.

Fisher's Ideal method

Prof. Irving Fisher has proposed a formula for constructing index numbers, which is called the 'Fisher's Ideal Index'. The Ideal index is given by the following formula:

Fisher's Price Index = 160_fisherideal method.png  x 100

As evident from the above formula,

Fisher's Ideal Index is the geometric mean of the Laspeyres and Paasche indices.

The following advantages can be cited in favor of Fisher's Ideal Index:

  1. Theoretically, geometric mean is considered the best average for the construction of index numbers and Fisher's index uses geometric mean.

  2. As already noted, Laspeyres index and Paasche index indicate opposing characteristics and Fisher's index reduces their respective biases. In fact, Fisher's ideal index is free from any bias. This has been amply demonstrated by the time reversal and factor reversal tests.

  3. Both the current year and base year prices and quantities are taken into account by this index.

    Fisher's Ideal Index

    808_fisherideal method1.png

    The index is not widely used owing to the practical limitations of collecting data. Fisher's Ideal Quantity Index can be found out by the formula,

    258_fisherideal method2.png

    x 100
Posted Date: 9/17/2012 2:49:49 AM | Location : United States







Related Discussions:- Fixed weight aggregates method - fisher''s ideal method, Assignment Help, Ask Question on Fixed weight aggregates method - fisher''s ideal method, Get Answer, Expert's Help, Fixed weight aggregates method - fisher''s ideal method Discussions

Write discussion on Fixed weight aggregates method - fisher''s ideal method
Your posts are moderated
Related Questions
To what extent does empirical evidence on corporate objectives support the predictions of Baumol’s “Sales Maximisation Hypothesis?”

Investors require an 11% return on a preferred stock that pays a $2.30 annual dividend.  What is the price

Present V alue This is the current value of a future payment or stream of payments. The present value is calculated by applying a discount (capitalization) rate to the

The following particulars relate to ABC Ltd. at the end of 2008: (i)  Rs. 500,000 equity shares of Rs. 10 each. Present dividend per share is Rs. 15; Market price Rs. 100 per sh

Tri-City Industries is considering two possible capital projects. Project A requires an initial investment of $240,000 and provides cash flows before tax of $120,000 in year one, $


Q. Example on Walters dividend model? Example: - The following information is obtainable in respect of a firm: Capitalisation Rate (Ke)                     = 10% Earning

using the operating cycle and any other financial management knoweledge,dicuss the applicability of such a cycle to the poultry biussiness in uganda (consider broilers)

discuss the applicability of operation cycle in avegetable growing business

Using the operation cycle and any other financial management knowlegde, discuss the applicability of such cycle to poultry business in uganda( consider broilers)